Final arguments begin in Microsoft case

WASHINGTON--Microsoft and nine plaintiff states return to the courtroom Wednesday for closing arguments in the software giant's antitrust remedy proceeding.

The day in court will bring to a close nearly two months of testimony, spanning 33 witnesses, before U.S. District Judge Colleen Kollar-Kotelly, who will now decide Microsoft's fate.

Nine states and the District of Columbia are pursuing stiffer sanctions than those proposed in a separate settlement with the Justice Department and nine other states. Kollar-Kotelly has yet to approve that settlement, leading some antitrust experts to wonder if she will treat the two different "tracks" in the case as one proceeding.

In a Tuesday court order, Kollar-Kotelly guided both sides to seek a compromise and to "prioritize the various provisions in your remedy proposals," organizing which portions are most integral "and which are less significant."

The judge also gave specific instructions to both sides; for example, she asked the plaintiff states "how could the defendant's proposed remedy be modified to make its terms more acceptable to plaintiffs." She also asked what changes the states would make to their remedy to satisfy issues raised during the court proceeding while still maintaining the remedy's goals.

For Microsoft, Kollar-Kotelly wanted to know which provisions of the states' proposed remedy "would prove least onerous to (the) defendant, yet remain effective as a remedy." She also asked Microsoft to identify provisions in its proposed remedy that "are more readily susceptible to reasonable modification."

Both sides, which will have about three hours each for closing arguments, expressed their interest in concluding this portion of the landmark, 4-year-old antitrust trial.

"We are very eager to bring this case to culmination," said Tom Miller, the Iowa Attorney General and one of the states' leaders, on Tuesday. "This is a historic case. It will have a huge impact on preserving fair and healthy competition in a computer age that seems to move at the speed of light."

"We look forward to today's closing arguments and the opportunity to crystallize the very compelling evidence presented in court that makes abundantly clear the substantial harm to consumers and the PC ecosystem posed by the states' remedy proposal," said Microsoft spokesman Jim Desler.

Legal experts said the content of the closing arguments will be most telling about the progress made in the proceeding so far.

"It will be interesting to see if the states mention modular Windows during the closing arguments," said Bob Lande, an antitrust professor with the University of Baltimore Law School.

One of the more contested remedy proposals put forth by the states would compel Microsoft to release a second version of Windows from which so-called middleware could be removed. This version would address a Court of Appeals ruling that Microsoft's commingling of Internet Explorer code with that of Windows was anti-competitive. In its unanimous decision, a panel of seven judges found that the commingling had no technical justification, but that it did discourage consumers from downloading rival Netscape Communications' Communicator Web browser and softened software developers' interest in that browser.

But Lande believes that modular Windows "is out of the picture. I don't think the states can realistically get this remedy." He based this conclusion on testimony by state witness Carl Shapiro, who failed to endorse the modular Windows proposal because of a lack of detailed knowledge about it.

Throughout the remedy proceeding, the states have positioned Windows XP Embedded, a modular version of Windows for embedded devices such as slot machines and ATMs, as a means of achieving this remedy provision. In a key admission, Microsoft Chairman Bill Gates acknowledged on the witness stand that Windows XP Embedded could in fact run on PCs.

Kollar-Kotelly wanted to see a demonstration of Windows XP Embedded in the courtroom, but a procedural error made by the plaintiff states forced them to withdraw the demo.

The separate settlement handles the middleware issue by allowing PC makers and consumers the ability to remove access to five programs: Internet Explorer, Windows Messenger, Windows Media Player, Outlook Express and Microsoft's version of the Java Virtual Machine. Those changes would come with the release of Windows XP Service Pack 1, which is currently in beta tests.

In a surprising turnabout, Microsoft on the eve of closing arguments announced a concession: The company's version of the Java Virtual Machine, which had been removed with the launch of Windows XP, will return as part of Service Pack 1.

Looking ahead
As the case moves forward, Kollar-Kotelly will have to juggle the two separate tracks of the case so as to avoid a catastrophic collision on appeal.

Besides the second version of Windows, the states also want Microsoft to give away for free the source code--or blueprint--to Internet Explorer, license through auction its Office software for use on competing operating systems and carry Sun Microsystem's version of Java for 10 years.

In terms of the settlement, "the judge is pretty limited in what she can do," said Andy Gavil, an antitrust professor with Howard University's School of Law. "Basically she can approve or reject."

Kollar-Kotelly could signal to the parties that she will not grant her approval without certain changes. But the more she ventures down the road of asking for changes that could position one track of the case against the other, the more problems she could face on appeal, legal experts said.

Technically, the settlement and remedy are separate, but the judge is in the unique position of being able to weigh one against the other.

She could, for example, simply approve the settlement and end matters there if she believes that the states did not make their case for stiffer sanctions.

"But I think things have gone on too far for her to do that," said Rich Gray, a Menlo Park, Calif.-based attorney who has closely followed the trial. "I would expect her to approve the settlement and also issue a harsher remedy, but maybe not as severe as the states are asking for."

Throughout the remedy proceeding, Microsoft scored one courtroom success against the states after another, which the company positioned as a victory in the case. But Iowa's Miller took a different view.

"This is a remedy proceeding," he said. "The courts already have determined that Microsoft broke the antitrust law by taking illegal action to maintain and extend its monopoly. Now the issue is what the court will order to unfetter competition, deny Microsoft the fruits of the violations and prevent further violations."

For Kollar-Kotelly, the issue won't be whether Microsoft violated antitrust laws but whether the separate settlement is enough of a remedy required to meet the mandate of last June's Court of Appeals ruling.

Kollar-Kotelly will have to sift through nearly two months of testimony, proposed "findings of fact" and "conclusions of law," and the Court of Appeals ruling in deciding what kind of remedy she will impose, if any. She is expected to issue her ruling as early as late summer.

California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia--and the District of Columbia--are continuing the litigation. Illinois, Kentucky, Louisiana, Maryland, Michigan, New York, North Carolina, Ohio and Wisconsin signed onto the settlement.

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